Iowa State Bar Ass'n v. Kraschel

• Decision Date: 07 February 1967
• Docket Number: No. 52338,52338
• Parties: Committee on Professional Ethics and Conduct of the IOWA STATE BAR ASSOCIATION, Complainant, v. Frederick J. KRASCHEL, Attorney at Law, Council Bluffs, Iowa, Respondent.*
• Court: Iowa Supreme Court

Page 621

148 N.W.2d 621

260 Iowa 187

Committee on Professional Ethics and Conduct of the IOWA STATE BAR ASSOCIATION, Complainant, v. Frederick J. KRASCHEL, Attorney at Law, Council Bluffs, Iowa, Respondent.*

No. 52338.

Supreme Court of Iowa.

Feb. 7, 1967.

Rehearing Denied March 7, 1967.

Emmet Tinley, Council Bluffs, for respondent.

Hedo M. Zacherle and Lee H. Gaudineer, Des Moines, for complainant.

MASON, Justice.

This is an appeal by respondent Frederick J. Kraschel, a practicing attorney, from the ruling and recommendation of the third division of the grievance commission of this court in disciplinary proceedings pursuant to Supreme Court Rule 118 as amended.

A complaint was filed against respondent with the commission by the committee on professional ethics and conduct of the Iowa State Bar Association alleging professional misconduct, violation of the canons of ethics and statutes of Iowa by commingling, converting and embezzling trust funds and failure to timely file federal and state income tax returns.

In answer respondent denied he was guilty of such conduct.

After hearing before the commission in accordance with the proceedings prescribed by it under rule 118, respondent was found guilty of various counts of conversion and embezzlement and failure to timely file federal and state income tax returns.

The commission recommended to this court that, provided respondent make payment to two parties, his license be suspended for two years and he be placed on probation for two years thereafter.

The respondent filed exceptions thereto and appeals, contending the record not only fails to support the recommendation of the commission by clear, satisfactory and convincing proof, but fails to establish satisfactorily dishonest or fraudulent motives on his part; that failure to timely file income tax returns does not involve moral turpitude and the penalty imposed was too severe.

Complainant urges in support of the recommendation that the practice of law is a privilege, not a vested right that may be withdrawn at any time a person is shown to be unfit to continue; there is clear, satisfactory and convincing evidence to support the commission and failure to timely file required state and federal income tax returns involves moral turpitude.

I. Respondent, 52, was admitted to practice law in June 1939 but did not go into the practice at that time. Following five years in military service he went into the farming and feed business, later he was in the industrial equipment business in Omaha, actually entering the practice of law in Council Bluffs in the summer of 1963.

On March 17, 1966 respondent was notified by the secretary of the Iowa State Bar Association that a complaint had been filed with him, alleging respondent had committed unethical practices as an attorney. A copy of the complaint, rule 118 and the rules of the commission relating to hearing the complaint were attached to the notice. At the hearing respondent was represented by his present attorney.

In the complaint as filed eight different matters were alleged in count one, all in violation of the canons of ethics; in count two an additional violation for failure to file federal and state income tax returns for 1963 and 1964 was alleged. An amendment to the complaint cited an additional violation. The complaints, other than income tax violations, all relate to a failure to account for funds.

On the day of trial a stipulation was filed between complainant and respondent, that if certain witnesses were called they would testify as set forth therein.

II. The first complaint involved a $1000 settlement made by respondent for his client. On the date of settlement, October 26, 1963, $300 was paid respondent and he received monthly payments totaling $525 thereafter. Respondent deposited the money thus received in his bank account and despite repeated requests for accounting and payment he did not remit the initial $300 until February 9, 1966, after investigation by complainant had commenced. At the hearing respondent recognized the moneys were held in trust for the client and the commission found this incident supported by the evidence.

Another incident involved collection of bond premiums totaling $112.35 which respondent failed to remit to the bond company. At the hearing he admitted receiving statements from the company, considered the collections an open account and recognized the funds were held in trust by him. No attempt was made to remit these funds until the investigation had commenced. He then made full payment February 11, 1966.

Still another incident involved money received December 1964 on a subrogation claim for a client. The proceeds were deposited in respondent's account and no payment was made to the client until February 5, 1966.

A complaint was made involving collection of accounts for a client where a dispute arose as to te amount of net collections, which was finally resolved at the agreed figure of $194.25. Respondent delivered his check dated October 23, 1964, to his client. The check was promptly deposited but was dishonored on three occasions. He made no reasonable effort to honor his settlement agreement made in November 1964, until he employed an attorney to represent him and made settlement in May 1965.

A further complaint involved partial collection of an account for a Des Moines client on January 19, 1964. Respondent made no attempt to make settlement until investigation by complainant had been commenced and finally remitted on July 31, 1965.

The complaint alleged in the amendment involved money received from a client to make settlement of a matter pending against him. The client testified at the hearing he gave respondent $150 in cash and was given a receipt but was unable to locate it. This incident was supported by the client's daughter who testified she had seen the receipt when her father left respondent's office. The client also testified he gave respondent an additional check for $150 a week or so later as a final payment on the $300 settlement. Respondent remitted the $150 to the plaintiff in the action and plaintiff's attorney said respondent informed him he had an additional $100 but didn't know when he would get the remaining $50. At the hearing respondent testified he had no recollection of this conversation nor receiving the $150. However, the commission found this complaint supported by the evidence.

With reference to respondent's failure to file federal income tax returns, he admitted he had not submitted returns for 1963 and 1964 until April 22, 1966 and had not initiated conferences with the revenue service until after July 1, 1965. Respondent also failed to file state income tax returns for 1963 and 1964, stating he was not required to do so for those years. However, the commission found the copies of the federal returns submitted indicated sufficient net income to require filing a state income tax return.

III. Respondent maintained two bank accounts for a year after commencing the practice in connection with the operation of his office. Thereafter he maintained one account to the date of hearing for all funds for the operation of his office and funds belonging to his clients. He commingled his funds and the balance in the account was substantially less at most times than the amounts collected for his clients.

The commission found the evidence clearly established respondent soon after starting to practice received on numerous occasions money in trust for clients which he commingled with his own funds, the trust funds thereby losing their identity in one bank account; that he not only failed to account for these funds promptly but ignored repeated requests for status and accounting and did in fact convert those funds to his own use for an unreasonable length of time. The commission also found respondent's belated action in remitting to his clients was, in part at least, motivated by the investigation of the complainant.

IV. The practice of law is a privilege and not a vested right. In re Meldrum, 243 Iowa 777, 784, 51 N.W.2d 881, 884.

'A disciplinary proceeding is basically an inquiry into the fitness of a member of the bar, in the light of his conduct, to continue in the practice of the law.' In re Simmons, 65 Wash.2d 88, 395 P.2d 1013, 1016. This proceeding is not criminal, but is special, civil in nature, and has been described as like an investigation by the court into the conduct of its officers. State v. Clarke, 46 Iowa 155, 159; In re Stice, 184 Kan. 589, 339 P.2d 29, 31; Prime v. State Bar of California, 18 Cal.2d 56, 112 P.2d 881, 884; State ex rel. Oklahoma Bar Association v. Massad, Okl., 334 P.2d 787, 791, and citations; In re Morford, 7 Terry, Del., 144, 80 A.2d 429, 432; In re Pennica, 36 N.J. 401, 177 A.2d 721, 730.

The extent of persuasion required of the prosecution in disbarment proceedings does not vary according to the type of conduct charged, regardless of whether it amounts to a crime or merely professional misconduct. In re Disbarment of DeCaro, 220 Iowa 176, 185, 262 N.W. 132, 136; In re Farris, 229 Or. 209, 367 P.2d 387, 391--392.

As to the degree of proof necessary in disbarment proceedings we approve the following from the Delaware Supreme Court, In re Morford, supra:

'The reported cases are not in harmony upon the question of the degree of proof required. A rather extensive collection of them will be found at 105 A.L.R. 985. The courts have ranged from a requirement of proof by the preponderance of the evidence to a requirement of proof beyond a reasonable doubt. We think the proper rule lies between these two extremes, for the reason that proceedings of this type are neither wholly civil nor criminal in nature. In adopting this rule, we are adopting the rule of the numerical and, we think, better considered weight of authority. It is difficult to define exactly the degree of proof required, but we think the clearest expression of a definition is...